Murdoch going after Time Warner?

posted at 10:01 am on July 16, 2014 by Ed Morrissey

Could Fox end up making CNN an orphan? A move by Rupert Murdoch on Time Warner may leave the cable news channel on the auction block as part of a media acquisition that would vastly increase Murdoch’s reach — or potentially weaken it, depending on the terms of the deal:

The media giant 21st Century Fox, the empire run by Rupert Murdoch, made an $80 billion takeover bid in recent weeks forTime Warner Inc. but was rebuffed, people briefed on the matter said on Wednesday.

The bold approach could put Time Warner in play and might again ignite a reshaping of the media industry, prompting a new spate of mega-mergers among the nation’s largest entertainment companies.

The news of the offer, the NYT’s Andrew Ross Sorkin and Michael de la Merced explain, might prompt more interest among shareholders of Time Warner than its board. So far, Murdoch hasn’t launched a hostile takeover attempt, but his track record suggests he’s not shy about doing so. The deal for shareholders looked pretty good on paper, with a 25% premium over current trading price, and that’s definitely going to interest at least some of their shareholders.

The problem with the deal, though, is in the structure of the offer and the different structures of the two corporations. Time Warner’s voting stock is widely held, while Fox’s voting stock is closely held within the Murdoch family. The bid would have been 60% stock based, but non-voting stock, which the Time Warner board rejected. That would mean that current large stockholders in Time Warner would lose a significant amount of leverage in the acquisition, and with it the power to protect their investment, other than the power of voting with one’s feet by selling their shares.

If Murdoch wants to sweeten the deal for either a hostile takeover or a friendly acquisition, he’ll probably have to bump up the cash ratio significantly or loosen up some of the voting stock. He may not be able to do the latter without leveraging the deal, which will mean relinquishing some control, and the former means the same outcome, only to different people and more permanently. On the plus side, Sorkin and de la Merced point out that 70% of shareholders in Time Warner are also shareholders in Fox, which means that they may be more amenable to the current stock structure remaining in place, but they’ll likely want more than 40% of the sale in cash anyway.

If the sale goes through, what happens to CNN? After all, there’s no way that regulators will allow one corporation to own the top two cable news networks. Fox planned for that contingency, and there isn’t a lack of potential buyers:

As part of the proposal to buy Time Warner, people briefed on the proposal said, 21st Century Fox indicated that it would sell CNN to head off potential antitrust concerns since Fox News competes directly with CNN. Putting CNN on the auction block would likely stir up a bidding war for the news channel; both CBS and ABC, a unit of the Walt Disney Company, have long been viewed as interested suitors.

CBS’ parent is Viacom, which like Disney has plenty of resources for such an acquisition. Rumors of a CBS purchase have been around for more than a decade. Media Bistro reported in 2008 that CBS was in talks to buy CNN, and in February of this year the site FTV Live claimed to have heard rumors that a sale might be imminent. Nothing has come of these reports, and it may not this time either unless Murdoch works his magic on Time Warner.

Time Warner shares rose 13% to US$80.40 in early New York trading. As part of the proposal, Fox indicated that it would sell CNN to ward off potential antitrust concerns since Fox News competes directly with CNN, New York Times said. Putting CNN on sale would probably lead to a bidding war for the news channel as CBS and ABC, a unit of the Walt Disney Co., have long been seen as interested suitors, the newspaper said.

That’s still below the premium of the original offer, but it raises the stakes for Murdoch if he wants to protect the voting stock in Fox.

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Since Fox broadcast is the longtime home of “Family Guy” and “Glee” and the film division of Fox has turned out some progressive-loving/conservative-bashing howlers over the past 20 years, this story is mainly fun in simply watching liberals heads explode at the thought Rupert would fire Bill Maher or cancel Leah Dunham’s show right off the bat.

He’s always been about the money, and he saw there was money to be made in a news channel that didn’t simply parrot the standard big media liberal biases when Murdoch hired Roger Ailes to create Fox News, which was simply an extension of his going against the normal liberal line in his newspaper publications in Australia, Britain and the U.S.

Enjoy the anguished cries of the progressives, but in the end, don’t expect much to change if the deal goes through. At best, you might get an HBO pay channel with shows directed less towards the liberal trendies, but only if Fox-Time-Warner’s boss thought there was some subscriber money to be made from it.

If the sale goes through, what happens to CNN? After all, there’s no way that regulators will allow one corporation to own the top two cable news networks.

The more I think about this the more silly it sounds to me. I don’t know how such an anti-trust challenge withstands legal scrutiny. CNN can always change its format, thus removing itself as a direct competitor to FOX. This isn’t about who “owns” all the journalists because journalists can work anywhere, but who owns the access. And any media company that owns access can start their own direct competitor to FOX.

So now subsets of a media conglomerate are potential anti-trust problems? Does that mean that MTV must now sell VH1?

I’m not sure that content matters when it comes to anti-trust law. I think what matters is how many channels are concentrated under a single owner.

NotCoach on July 16, 2014 at 10:21 AM

We’re getting to where the federal government has to approve pretty much any big transaction. After all, corporations are inherently evil or something.

I personally don’t see the issue with one parent company owning Fox News and CNN both. Yeah, they compete. But they’re hardly the only players in the cable news market. Okay, MSNBC might be laughable, but they are a competitor. So is C-SPAN, for that matter. And Bloomberg News. And CNBC. And Fox Business. And on and on. And there are plenty of media companies out there with the financial resources to make a new entry into the cable news market if they so choose. It’s not like Fox News and CNN being both owned by Murdoch would create barriers to entry that don’t already exist today.

But, like everything else, anti-trust laws have been expanded to the point of ridiculousness. Gone are the days when they applied to companies like AT&T which were a legitimate monopoly in the sense that they were quite literally the only telephone company and it was impossible for any competitor to enter the market. Now we apply anti-trust laws to any corporations the federal government thinks are just too darn big, and it all becomes about picking winners and losers.

Now we apply anti-trust laws to any corporations the federal government thinks are just too darn big, and it all becomes about picking winners and losers.

Shump on July 16, 2014 at 10:27 AM

Excellent point – and one of the biggest problems with the expanding fascism of the federal government…it doesn’t belong picking winners and losers in any industry. (And that is beyond the fact that historically, the government has an annoying habit of picking the losers as winners.)

15 years ago or so, the big news was the government’s anti-trust suit against Microsoft – largely prompted by competitors who were losing the competition in the marketplace and sought the government’s assistance to help them compete without having to innovate or take MS on.

But today, in Google and Facebook, we have companies that are doing what MS was accused of doing – but because they know to grease the palms of Washington DC – they are largely getting a pass for their actions to eliminate competition.

Rupert Murdoch isn’t as conservative as he’s demagogued to be – but because of FNC’s focus on ‘Fair and Balanced’ compared to the massive bias of it’s competitors, he’s a target of the fascist left. Even ‘fair and balanced’ is a threat to expose / highlight the mendacity and corruption of the fascist left…so they demagogue Fox and Murdoch. To the fascist left, 1984 is an instruction manual.

In marketing terms? A hostile takeover means a buyer makes an offer to acquire a controlling interest by bypassing the target company’s management and offering a “deal you can’t refuse” directly to the target’s shareholders.

One high profile example was IBM’s hostile takeover of Lotus. In 1995, IBM bought the company by offering ~$60.00 per share tender when Lotus was trading at ~$33.00 per share.